Supreme Court declines financier's bid to block SEC action

By Lawrence Hurley

WASHINGTON (Reuters) - The U.S. Supreme Court on Tuesday rejected a request by Lynn Tilton, the New York financier accused by the Securities and Exchange Commission of defrauding investors, to put on hold an SEC enforcement action as she challenges the agency's in-house judicial proceeding against her.

The court's action means that Tilton will face an Oct. 24 hearing before an SEC administrative law judge over whether she and her firm, Patriarch Partners, hid the poor performance of assets underlying her Zohar collateralized loan obligation funds, and collected nearly $200 million in improper fees.

Tilton, dubbed the "Diva of Distressed" for turning around troubled companies, has said SEC administrative proceedings are unfair to defendants like her, and that the means by which presiding judges are appointed violates the U.S. Constitution.

In a June ruling, the New York-based 2nd U.S. Circuit Court of Appeals rejected her challenge to the process, saying it was premature because the SEC had not finished its administrative case, and thus the court where she sued lacked jurisdiction.

Tilton and Patriarch sued the SEC again in Manhattan federal court on Sept. 9, seeking to prevent the commission from pursuing in-house enforcement actions.

That lawsuit accused the SEC of violating Tilton's constitutional rights to due process and equal protection.

Tilton and other defendants in SEC administrative proceedings have said the appointment of SEC administrative law judges and hurdles that can make it impossible for the U.S. president to remove those judges run afoul of the Constitution. Federal courts have so far ruled for the government.

(Reporting by Lawrence Hurley; Additional reporting by Jonathan Stempel; Editing by Will Dunham)